If you have just been introduced to cryptocurrency, you’re probably asking yourself what these “altcoins” are that everyone keeps talking about. Altcoins, in short, are all the coins outside of Bitcoin, though some people will also throw Ether into the mix. There are literally thousands of coins and tokens on the market with different purposes, protocols, and characteristics, and they often have lots of growth potential. They can also be risky, however, and you need to know how to identify good ones before you start digging into the altcoin basket. Let’s take a closer look at what altcoins are specifically and how to pick them.
A Short Introduction to Altcoins
As we said earlier, an altcoin is basically anything not called bitcoin and there are over 22,000 altcoins on the market right now. That’s right, 22,000. This is why you need to be very careful before you start looking at altcoins and understand what their function is.
You have coins out there whose sole goal is to bring stability to your portfolio, for instance. These are called stablecoins and are often pegged to a base currency to give you liquidity without the volatility characteristic of most cryptocurrencies. You also have coins that need to be used to power and set up apps on specific blockchains. Ethereum is an example of such a coin, but there are plenty of others.
You also have altcoins that are pretty much jokes like Dogecoin, but that doesn’t mean that they’re completely useless. Some of these coins have decent protocols breaking them, and some of these coins could allow you to make lots of profit if you can time the momentum properly.
How to Know if an Altcoin is Worth Investing in?
There are many ways to know if an altcoin is worth it. The first thing you have to do is make sure that it’s at least in the top 50 to 100. Sites like OKX routinely rank the top cryptocurrencies and list their price in fiat money, and if the coin in question is not on their list, then it could be too small to be considered and might be very different to trade or acquire.
Next, read the coin or project’s whitepaper, and see what people have to say about it online. Also, check what they think about the team behind the project. Check if the coin’s purported use case has been demonstrated and look at the historic price action for the coin. Then check for any recent news regarding the coin or the project that it’s backing.
If you’ve been kicking yourself for not investing in Bitcoin earlier, altcoins could give you a chance at getting great returns in a relatively short period. Another great thing about Altcoins is that they can allow you to support projects you believe in. Some of them have tangible uses too.